Gold Development Inc. (GDI), a newly incorporated not-for-profit organization with a December 31 year end, will offer low-rent housing services for people with low income.
GDI reports to Logimex, a government agency that requires audited annual financial statements to be filed. Michel Bilodeau, GDI's project originator and administrator, is not familiar with the preparation of financial statements.
GDI received a non-repayable grant from Logimex in February 2013 for the construction of an eight-storey apartment building. Construction began in April 2013. Residents will start to move into the apartment building between October and December 2013, although it will not be entirely completed until the end of December 2013. By December 2013, all the apartments should be rented.
GDI receives donations from companies and individuals in the region. It has received pledges from large, well known companies for the next five years, and pledges from individuals for the current and next year.
Pledge amounts have been set out in writing on forms signed by the donors. For a nominal salary, Mr. Bilodeau manages the organization with the help of his wife and the local priest, both of whom are volunteers.
Required
(a) Explain to Mr. Bilodeau what is meant by "reporting on a restricted fund accounting basis."
(b) Advise Mr. Bilodeau on how GDI will account for the above facts if GDI decides to report on a restricted fund accounting basis.